Adversarial proceedings in US bankruptcy court are legal actions brought by interested parties to determine the distribution of a debtor’s assets. Creditors can use them to determine the enforceability of a debt or validity of a lien, while trustees may use them to object to incomplete or fraudulent asset lists or move a case from Chapter 7 to Chapter 13. Once a debtor receives an official discharge, former creditors cannot attempt to collect debts.
In the United States, the adversarial is a procedural device used to determine the distribution of a bankrupt debtor’s assets. Adversarial proceedings are legal actions brought by subjects interested in the bankruptcy process, and start with the presentation of a formal appeal to the bankruptcy court. Such proceedings are governed by the Federal Bankruptcy Rules.
The cross-examination complaint is notified to the person who is the object of the proceeding. After the person served with the opponent’s lawsuit files an answer, the bankruptcy court schedules a hearing before a judge, who then resolves the dispute. Adversarial proceedings are often used to resolve competing claims between a debtor’s various creditors. A claim in a bankruptcy case can be filed by the debtor, the debtor’s creditors or the bankruptcy trustee.
Creditors can initiate an adversarial procedure to determine the enforceability of a debt. Usually the creditor who files a complaint against a debtor opposes the extinction of the debt due, as it falls within one of the exceptions to the extinction provided for by the Bankruptcy Code. An example of an exception would be if the debt was incurred through fraud. Creditors can also initiate an adversarial procedure to determine the validity of any liens, as well as to establish the priority of their claims as preferential creditors.
A bankruptcy trustee, who is charged with arranging all of the debtor’s available assets for distribution to creditors, may have reason to initiate adversarial proceedings against a debtor. The trustee can object to the way in which the debtor has compiled his lists of assets and liabilities, either because they are incomplete or inaccurate, or because they are intentionally fraudulent. A trustee may also seek to move a debtor’s bankruptcy case from a Chapter 7 case to a Chapter 13 reorganization plan, if it appears that the debtor has the financial capacity to make a partial payment, over time, to some of the his creditors.
When creditors are notified that a debtor has filed for bankruptcy protection, all collection activity is automatically suspended, pending the resolution of the case. A debtor may initiate inter partes proceedings against some of his creditors for breach of this court order. Once the debtor receives an official discharge from the bankruptcy court, former creditors are prohibited from attempting to collect the debts.
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